Entain: Soft Australia and Brazil markets to pick up UK drags

Entain Plc’s leadership duo of CEO Jette Nygaard-Andersen and Deputy Rob Wood have notified investors that 2023 will be a tougher year for the FTSE100 gambling group’s UK arm. 

Though the firm’s revenue make-up continues to be diversified via M&As, UK brands accounted for 27% of Entain’s online NGR – contributing approximately £840m of the group’s £3.3bn online NGR results for 2022.

Entain’s flat online performance was offset by a 66% increase in retail revenues to £1.27bn, primarily attributed to the post-pandemic recovery of the Ladbrokes Coral unit (+56%).

As detailed in its accounts: “In the UK, NGR was -9% behind 2021 as the business absorbed a number of regulatory changes and lapped Covid boosted comparators from the prior year.”

Countering increased regulatory headwinds, Entain maintains its UK strategy focused on expanding its recreational customer base, noting that “during Q4 and active customers at a record high, with full-year actives +13% versus 2021”.

UK pressures were at the top of analysts’ observations of company results, which saw Rob Wood divulge that the firm would maintain “an expected 10% impact on its UK online business, that will continue into the first part of the year”. 

He added: “UK affordability is really the main factor here, as we expect or hope for the figure to decrease as the year progresses, but that will be down to what’s inside the White Paper”.

Foreseeing further home market adjustments, Entain leadership had provided a cautious strategic guidance for 2023, in which it expects to generate a “low-to-mid single-digit pro-forma growth” – dependent on UK outcomes. 

The firm’s 2023 outlook carries the costs of circa £30m, reserved for “inflationary cost headwinds from energy & wages” attached to its retail unit and an additional £10m reserved for potential one-off restructuring costs.  

Probed on whether potential M&A activities and certain markets would offset UK drags, Nygaard-Andersen outlined confidence in the continued market-share gains of Entain’s global portfolio.

“When it comes to 2023, we expect to see growth from all of our major markets excluding the UK, as Rob mentioned,” the group’s CEO explained.

“It will be a mix of Brazil, Italy, Enlabs (Baltics) and Australia” Nygaard-Andersen commented on NGR pick-up.” 

Growth and rapid market share gains are expected in non-regulated Brazil, which currently accounts for 6% of online NGR, and a market in which Entain seeks to secure a “further podium position”.

Yet Nygaard-Andersen singled out the firm’s Australian unit for praise, in which its brands of Ladbrokes Australia and NEDs have locked in “19% on online market share in just three years.”

“Yes we have seen a lot of noise from Australia and a lot of generosity from our competitors in the market”, Nygaard-Andersen pointed to downturns for Tabcorp and Flutter’s Sportsbet brand.

“Our Australian team has done an outstanding job during the year, increasing NGR by 12%. It’s also important that they have delivered new products to market such as the Ladbrokes Racing Club.

“Australia’s competition will rebalance, but it’s still a soft market. We expect to take a greater share and to have a driving seat in the market.”